U.S. energy firms this week cut the number of oil and natural gas rigs operating for the fourth time in five weeks, energy services firm Baker Hughes said in its closely followed report on May 24.
The oil and gas rig count, an early indicator of future output, fell by four to 600 in the week to May 24 the lowest since January 2022.
Baker Hughes said that puts the total rig count down 111, or 16%, below this time last year.
Baker Hughes said oil rigs were unchanged at 497 this week, while gas rigs fell by four to 99, their lowest since October 2021.
The oil and gas rig count dropped about 20% in 2023 after rising by 33% in 2022 and 67% in 2021, due to a decline in oil and gas prices, higher labor and equipment costs from soaring inflation and as companies focused on paying down debt and boosting shareholder returns instead of raising output.
U.S. oil futures were up about 9% so far in 2024 after dropping by 11% in 2023, while U.S. gas futures, meanwhile, inched up about 2% so far in 2024 after plunging by 44% in 2023.
That increase in oil prices should encourage drillers to boost U.S. crude output from a record 12.9 MMbbl/d in 2023 to 13.2 MMbbl/d in 2024 and 13.7 MMbbl/d in 2025, according to the latest U.S. Energy Information Administration (EIA) outlook.
But a drop in gas prices to 3-1/2-year lows earlier this year caused several producers to slash spending and reduce drilling activities, which should cause U.S. gas output to drop to 103 Bcf/d in 2024 from a record 103.8 Bcf/d in 2023, according to the EIA.